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I want to get something off my chest. This “Why Do Rich Hedge Funders Hate Bernanke” meme is pissing me off. And sometimes, when something really chaps your ass, you just gotta write about it.

In a nutshell, some very respected macro guys said some very harsh things about Bernanke at the latest Ira Sohn conference (a who’s who gathering for star money managers). Stan Druckenmiller, in particular, said Bernanke was running “the most inappropriate monetary policy in history.”

Other investing titans, like Peter Singer of Elliott Capital Management and Seth Klarman of the Baupost Group, have torn the Fed’s policies to shreds in their quarterly letters. (Singer is particularly eloquent. You can read an excerpt of his Bernanke policy indictment here.)

In backlash to these hedgies ripping Bernanke a new one — with Druckenmiller at Sohn the seeming catalyst — there has been an outbreak of journalistic smugness (the forementioned “Why do rich hedge fund managers hate Bernanke” meme). Here are some examples:

Here is his forehead-smackingly obtuse conclusion as to why “old” money managers — as if having experience in macro is a liability! — hate Bernanke:

Hedge funds are doing badly in this rising-tide-lifts-all-boats market, and they feel that they would be outperforming if the Fed just let things collapse, and they could swoop in when prices “clear.”

The inflation and hyperinflation fantasies are another important aspect here. A lot of these guys cut their teeth during the 80s, when inflation was the enemy, and Volcker was a hero for fighting it. Thus being anti-inflation is kind of a nostalgia trip for them. Also in general, the older people are, the more worried they are about inflation. Also the older people are, the more they are inclined to invest in bonds and risk-free assets, so low rates aren’t fun.

Really dude? REALLY? Never mind that putting all hedge fund managers in a monolothic group makes about as much sense as putting all actors, golfers or musicians in a monolothic group. Outliers of talent, consistency and skill credibility make a HUGE difference. (Another reason why assessing “all” hedge fund managers in toto makes about as much sense as assessing “all” musicians in making a pronouncement on the quality of music available. You don’t listen to ‘em all, dummy.)

Even putting that aside, the level of asinine blather in Weisenthal’s conclusion above (and in the rest of the piece) takes the cake…

Normally the mouth-breathing theories of the mainstream financial media can be ignored. But in this case the stupidity is beyond belief. As a cathartic exercise, here is my open letter to Weisenthal (and by extension his like-minded non-trading, non money-managing peanut gallery brethren):

Weezy, you f–g IDIOT. Do you really want to shove your head all the way up Paul Krugman’s rectum just because the stock market is hitting new highs? As for dismissing all these “old” money managers — Druckenmiller, Singer, Klarman in particular — have you considered these guys have made BILLIONS upon BILLIONS for their clients, and have some of the best track records in existence?

Druckenmiller earned 30% compound returns over 30 years for god’s sake. He architected the famous Soros British Pound trade in 1992 that netted a billion plus in one day. He has forgotten more about macro than you will ever know. Singer and Klarman are also superstars in their own right — Klarman hailed by some as better than Buffett — running tens of billions, with excellent risk-adjusted returns, for decades. In other words, these guys are not run-of-the-mill sour grapes snipers with nothing better to do than drum up attention. They are the documented best of the best, and waving that off, as opposed to considering the substance of their arguments, is insane.

Have you further considered that maybe these guys actually care about the danger they see coming as opposed to having personal axes to grind? It would be one thing if, say, Stan Druckenmiller was an out of work pundit trying to drum up some business. But the guy is a multi-billionaire, retired to trade his own billions, AND he is sharp enough to be long the Soros-style “false trend” created by inflated QE hopes. Even as he is hating this artifically induced market, he is probably making a killing on it, because he is a world class trader. Klarman and Singer, billionaires too, are also making money. So have you considered the possibility that maybe they actually understand something you seem to completely dismiss: That no matter how good things look now, they may well end very, VERY badly.

Have you ever traded, Weezy? Could you even trade your way out of a paper bag? Do you have any memory of macro-historical events like, say, the dot com bubble and bust? Have you even considered the possibility that the “Bernanke won” euphoria percolating now is comparable to the Nasdaq 5,000 euphoria circa Spring 2000? Or that Alan Greenspan was feted as “The Maestro” before his reputation went down in flames under the weight of historical aftermath? Or that this kind of shit happens OVER and OVER again, where policies that deliver short term pleasure have extremely painful consequences on a delayed basis, and that maybe these “old” managers you dismiss like a hand-waving doofus have the foresight to SEE that pain coming… because over the decades that is what they have proven themselves the best in the business at doing?

Phew. That felt good to get off my chest…

Again, we normally ignore the ramblings of blowhard journos who don’t actually trade and would probably have to scramble to get together three hundred bucks for a Scottrade account. But in this case, the blatant Krugman worship — the view that Keynesianism has won, that QE has proven itself, that all is sunshine and rainbows and Bernanke is the man — is just so damn myopic it is mind-blowing. If we are entering a blow-off euphoria stage, then OF COURSE it is going to look like central bankers are heroes, because virtually EVERY major policy induced bubble or instance of false trend mania has generated feelings of euphoria and invincibility leading into the peak stage!

Also for the record: No sour grapes coming from this corner either. We are not short any equities right now, and put on a hefty-sized long small caps position (now nicely profitable) some days back when it became clear that “risk on” was going to dominate. (The only thing we are short at moment is AUDUSD — a position looking mighty sweet as of this writing.)

And for all those doing Bernanke / Krugman victory laps: Read up on reflexivity theory and the phenomena of false trends.

I have developed a rudimentary theory of bubbles along these lines. Every bubble has two components: an underlying trend that prevails in reality and a misconception relating to that trend.When a positive feedback develops between the trend and the misconception, a boom-bust process is set in motion. The process is liable to be tested by negative feedback along the way, and if it is strong enough to survive these tests, both the trend and the misconception will be reinforced. Eventually, market expectations become so far removed from reality that people are forced to recognize that a misconception is involved. A twilight period ensues during which doubts grow and more and more people lose faith, but the prevailing trend is sustained by inertia. As Chuck Prince, former head of Citigroup, said, “As long as the music is playing, you’ve got to get up and dance. We are still dancing.” Eventually a tipping point is reached when the trend is reversed; it then becomes self-reinforcing in the opposite direction.

Typically bubbles have an asymmetric shape. The boom is long and slow to start. It accelerates gradually until it flattens out again during the twilight period. The bust is short and steep because it involves the forced liquidation of unsound positions.

Now — and I’m talking to you, smugly history-blind journos — stir the above in your perspective-challenged brain and add the following:

Dismissing cranks and blowhards is one thing. But waving off guys with some of the BEST LONG-TERM TRACK RECORDS IN EXISTENCE is probably not a sound idea.

The appearance of stability, soundness and even invincibility in the strongest stages of a Soros-style false trend (before the decelerating twilight / self doubt period comes) is a normal and even expected occurrence.

Historical evidence shows that “party now, pay later” monetary policy strategies — and trading strategies too for that matter — tend to have a “cartoon whale” graph profile: The curve slopes higher, increasing confidence all the while, until you get to the whale’s forehead. Then there is a near vertical drop.

The guys who have made billions seeing around corners may not just be griping because they are “old” or “cranky.” It may be in fact they see what is coming based on the fact that blatant central planning and market distortion has never had a happy ending, whereas the “oh shit” moment following on the heels of max confidence (such as what is being displayed now) prior to deceleration and harsh denouement has occurred OVER and OVER again.

Dismissing straw men is not the same as dismissing real dangers. Krugman and others (but mostly Krugman) deserve shoulder pats for dismissing the cranks over the past few years who constantly claimed that hyperinflation was just around the corner or that the US bond market was about to crash. But again, kicking sand in the face of the 90-pound geek at the beach (who presents plenty of false errors to harp on) isn’t the same as manhandling Arnold Schwarzenegger.

The real test is how we are going to get the hell out of this — how QE and mass stimulus will be withdrawn, if it is even possible to withdraw, and / or what happens when inflation pressures start to accelerate in synchronized fashion with the realization that the risks are too big, and that central banks can’t truly pull out even if they desire to because the patient would be killed by sudden withdrawal. THE REAL FIGHT IS NOT EVEN HERE YET, DO YOU UNDERSTAND? ANY JACKASS CAN START A MARTINGALE CHAIN, JUST LIKE ANYONE CAN TAKE OUT A LOAN FROM THE MOB. THE QUESTION IS HOW YOU GET OUT.

Last but not least, do not doubt the ability of the sharpest players to make money even in environments they “hate.” Stan D. is likely not only long here, he is probably killing it. This again goes back to track record and demonstrated capabilities. World class traders (and to some extent investors) know how to exploit false trends profitability, even if they do not like what they see coming. If you are not a trader yourself, you may not understand this flexibility or even comprehend it. That’s ok. That’s why you are paid like a journalist.